Adani’s Ambuja-ACC is frontrunner to acquire Sanghi Cements – ET Infra

Adani group’s Ambuja-ACC has emerged the frontrunner to acquire Sanghi Cements after deal negotiations moved forward over the course of the past one week and the Adani group companies proposed better acquisition terms, according to people aware of the matter.

Ambuja-ACC and JK Lakshmi Cement are leading the race to acquire Ahmedabad-based Sanghi Cement, ET had first reported on 25 July.

As per sources aware of the matter, Adani group has come close to the expected enterprise value of Rs. 6000 crore that Sanghi Cement’s promoters have demanded as consideration for the sale of the company. JK Lakshmi Cement is also in the running but has not matched the enterprise value demanded. The enterprise value includes debt of around Rs. 2000 crore.

“Negotiations are ongoing and team from both sides could formalize an arrangement very quickly. There are just a couple of issues that need to be ironed out”, a person briefed on the matter said.

Sanghi Cement is controlled by the family of Ravi Sanghi who are the promoters of the listed Sanghi Industries. Sanghi Industries’s shares hit a 52 week high of Rs. 100.40 on Wednesday giving the company a market capitalization of nearly Rs. 2600 crore.

Adani group could not be reached for comment. “No comments on speculation”, an Adani spokesperson told ET last week when contacted for the group’s comments on their interest in acquiring Sanghi Cement. Sanghi Cement declined to comment.

ET had first reported about talks involving the sale of Sanghi Cement to Shree Cement on 29 April and subsequently reported about JK Organization and Nirma’s interest in the company on 6 June.

Nirma Group and Dalmia Bharat had also submitted proposals to acquire Sanghi Cement company but are no longer in the running, according to sources in the know.

Ambuja Cements delivered earnings before interest, tax, depreciation and amortization of Rs. 1930 crore for the quarter ended 30 June of the current financial year registering a year-on-year increase of 55%. The consolidated sales for the quarter were Rs. 8713 crore, also rising by 9%.

It is the second largest cement player in India after Aditya Birla Group-owned UltraTech. Ambuja-ACC are both debt free and have only obtained non-fund based facilities from banks such as bank guarantees and letters of credit, according to a recent report from credit rating agency CRISIL.

In a note released on 28 April, CRISIL assigned a AAA rating to Ambuja Cement’s bank facilities.

“The strong presence of the Adani group in coal, power and logistics verticals will result in structural reduction in cost of production of cement owing to synergy benefits strengthening the business risk profile over the medium term. The financial risk profile of the company will remain strong over the medium term supported by a debt-free balance sheet and robust liquidity”, CRISIL said in the note.

The ratings agency remarked that it had noted findings of the Hindenburg report published on January 24 and would watch for developments in the credit risk profile of Adani group companies as those could have a bearing on Ambuja’s credit risk profile.

The Adani family had raised $6 billion through a mix of debt, equity and shareholder loans to finance the Ambuja-ACC acquisition.

Adani has outlined plans to raise cement capacities of Ambuja-ACC from the present 67.5 million tonnes per anum to 140 million tonnes per anum by 2028.

  • Published On Aug 2, 2023 at 12:02 PM IST

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